Friday, 29 May 2009

Congratulations to Jordan who won the draw for the free book The Cost of Capitalism (and if you did not see my note to send me an email with your name and address, this is a reminder).

Robert Barbera, the book's author believes that bubbles are an inevitable recurring part of our capitalist system. So I asked for opinions on what would likely be the next bubble. Here is the tally from the comments:

My own vote would go to green tech related to energy (into which I lump alternative energy) for these reasons: it sounds good, has a real basis and there is a strong need for it (just like the tech bubble was based on the powerful reality of the Internet and computing) which means people can believe in it but be fooled in the assessment of the value of individual companies; big money players like venture capitalists (the same ones who were instrumental in the tech bubble), pension funds, governments, mega-corporations, investment banks all have a strong incentive to create another bubble and are pouring large sums into it already; it's new and people will be able to say "this time it's different".

Thursday, 28 May 2009

Invest Skeptically has dug up a fascinating report The Business of Ageing by John Llewellyn and Camille Chaix-Viros on the implications of ageing populations. There is a lot of thought-provoking original research in the almost book length 136 page pdf from Nomura International plc published Nov.28, 2008. Topics covered include: life expectancy and health-in-old-age trends, retirement age trends and incentives, effect of pension liabilities on companies and asset prices, effects on bond/equity asset prices, currencies and real interest rates, a series of impact assessments on eleven major sectors from autos, through banks, leisure, media, real estate, insurance, food and general retail, media, healthcare and pharmaceuticals. Below are highlights from the report.

Population, Health, Working, Pensions

old no longer means age 65, it means 80 in terms of health and capability to work

people in their 60s and 70s are generally healthy and do not live a miserable, vegetable-like existence in a wheelchair waiting to die i.e. we can expect to more or less be ok and enjoying life till shortly before we die

the age of still being healthy has been rising faster than life expectancy - a greater proportion of our extended lives are healthy

four things that will add up to 14 years extra life: eat lots of fruits and vegetables, don't smoke, consume alcohol in moderation, exercise regularly

governments (for cost reasons) and companies (for cost and because older workers are good workers) will deploy incentives to retire later

an older population doesn't mean a decaying economy - there is a lot of room for quite capable older folk to go back to work, or to keep working instead of retiring early

life expectancy has been rising for many decades and probably will continue to do so

women outlive men - a fact evident since 1840 and there is no sign of that changing

life expectancy (average of the sexes) in 2050 will have risen to between 85 and 89 in all developed countries; even rampant obesity (the undisputed obesity champion being the USA with about 30% of the population being obese while Canada occupies 8th place at about 15% and the UK is 4th at 20% )

spending on healthcare only rises dramatically in the last 3 months of a person's life (US data)

people on defined benefit pensions retire earlier than those on defined contribution schemes

the official retirement age is likely to be raised progressively in most countries

"All the predicted problems in financing pension and health schemes that result from a rising old-age dependency ratio could be avoided. All that would be required would be to remove the public policy and private incentives that at present induce people to give up work sooner than they might freely choose to do." That last bit is interesting - people are induced in various ways to retire (like tax and income penalties for staying in work) when they otherwise might not. The problem all developed countries face could be fixed without nasty, punitive government action.

older workers can actually be better workers for companies: less absenteeism, less stealing, better customer service, more experienced / knowledgeable, less staff turnover, more profit, as the B&Q case study shows

Investment

"meltdown" is too strong a word to describe the idea that as boomers age and sell their investments (equities and bonds) for living expenses, asset prices will be driven down; there will be a muted effect on lowering asset prices

another way of saying this is that real interest are now at their lowest point and likely to rise - bond and equity yields will rise

current account surpluses in developed countries (= net savings = acquisition of foreign assets) will decline or stop and the money will be repatriated by boomer retirees for living expenses, which will drive up currencies of developed countries; a big question mark is whether the US will be the repository of demographically-induced savings to determine whether the USD appreciates along with other developed currencies, or depreciates by a lot. In the latter scenario, CAD also depreciates relative to other developed world currencies, but by less than the USD. In both scenarios CAD appreciates vs the USD over the next three or four decades. If this comes to pass, hedging US investments and leaving the rest of the world investments exposed to currency shifts is the correct strategy for Canadians.

the whole chapter on pharmaceuticals is a good primer on the industry

older people are big drug users, er consumers, for conditions like angina/hypertension, diabetes and cancer, which favours pharmaceutical companies; Eil Lilly and Novartis are said to be well-positioned with the right product mix

generic drugs will continue to gain importance and companies like Barr Laboratories and Mylan Inc to benefit, along with Novartis and Teva

auto companies will have to sell fewer but fancier cars to older folk

"We expect the beneficiaries of ageing populations to be mainly the large, well-diversified life insurers and specialist reinsurers with strong balance sheets" who will provide retirement products

older people spend a lot more on eating out and gambling(!) in their leisure expenditures than younger people

real estate - "we expect a shift from the suburbsand commutable locations to the countryside, and from colder to warmer climes, with a general selling down given that retirees tend to sell more homes than they buy"

Wednesday, 27 May 2009

About a month and a half ago, Claymore Canada announced the launch of a new ETF with broad emerging markets equity exposure sold on the TSX under symbol CWO. At the time, Canadian Capitalist posted a brief assessment and so did his readers with excellent comments. With due recognition to CC, here is my summary, along with some extra bits on the currency hedging method used by CWO (my analysis) and investor costs (input from Som Seif, President of Claymore, who was kind enough to respond to my email enquiry).

The Good:

broad emerging markets exposure in a Canadian ETF - this is a new thing, though Canadians could have bought Vanguard's emerging markets fund in the US (NYSE: VWO), which is in fact the same thing since CWO's holdings consist 100% of VWO

fund is Canadian domiciled, i.e. is a Canadian not a US security, for US tax purposes, which prevents this fund from being subject to US estate taxes for high net worth investors - those with estates of more than c.USD$3.5 million (I wish!) according to PriceWaterhouseCoopers' U.S. Estate Tax Exposure for Canadians (updated April 2009)

MER of 0.65% is reasonable considering trading and currency transaction fees, especially those doing regular rebalancing and using a broker who won't allow wash trades or USD in a registered account. Som Seif sent this comparison of a Canadian buying VWO and holding it three years:

When you buy and sell, you pay 1-1.5% exchange rate spread.So, cost to you for buying and then holding for 3 yrs is 1%+3x25bps+1%=2.75%. That's 90bps a year.

If you do any trading in between the 3 yrs for rebalancing, the cost goes up even more.

The Bad

currency hedging in CWO is CAD vs the USD not CAD vs the various currencies of the emerging markets countries starting with India (19% of the portfolio), Brazil (15%), Korea (12%) etc. What Claymore does is called proxy hedging - the USD is used as a proxy / replacement for the basket of CWO's currencies on the supposition that as goes the USD, so goes the basket. The reason for doing proxy hedging is that few world currencies are liquid enough to easily and cheaply hedge. Som Seif says it works, but being ever the skeptic, I took a closer look, using the top ten countries which comprise 90% of CWO as my sample. My simple analysis in the chart below suggests that over the last 1-year and 3-year periods, the USD and the CWO currencies have not gone up and down together against the CAD. In fact, the CWO currencies as a whole have hardly changed at all vs the CAD, suggesting that hedging isn't necessary at all! Individual currencies have had big shifts but they have almost completely cancelled each other out. Meanwhile the USD has had much larger swings. Granted, this is a short time period so CAD might gain against the emerging world for the next twenty years, and reduce the CAD value of those foreign holdings as a result, which would make hedging worthwhile. But hedging USD vs CAD seems to be a poor way to hedge VWO. CWO's tracking errors against the MSCI index it is supposed to mirror are likely to be very large.

Thursday, 21 May 2009

Received this press release from the folks at Questrade about an online webcast. Given the panelists it may well be worth listening in and maybe even firing some questions at them. Bloggers starting to get some respect from the mainstream, wow!

''Toronto, ON (May 19, 2009) – On Monday, May 25th, at 2 p.m. ET, a live webcast / panel discussion will explore the recent surge in usage of social networking tools for investment and trading advice.

The panel, I Invest Therefore I Tweet, is moderated by Michael Hainsworth, host of Market Call on Business News Network (BNN), and includes panelists FrugalTrader (MillionDollarJourney.com author and blogger), Jonathan Chevreau (blogger, author, and National Post personal finance columnist), and Sam Seiden (pro trader, author and trading instructor).

The panel investigates the ways traders are using social media to take charge of their investments, including the tools that are being used, how they are being used, personal privacy and security issues, and how to filter information for accuracy and reliability.

Edward Kholodenko, President and CEO of Questrade says: “Investors are exhausted by the market downturn. Their portfolios are diminished. They don’t know who to trust for advice any more. While the use of social networking like Facebook, blogs, forums, even Twitter isn’t new for online investors, what is new is how pervasive and influential these tools have become.”

The panel discussion will take place in Online Trading Academy (Canada)’s new high-tech facility in Toronto, and will be webcast live. Registration for the event is free and is available at www.Questrade.com/tweet. Viewers of the live webcast will be able to Twitter their questions to http://twitter.com/Questrade or post questions directly in the webcast window.

Kholodenko continues: “Since our inception 10 years ago, Questrade’s mission has been to give Canadians the information they need to achieve financial independence. I believe our mission is even more relevant now, particularly as we incorporate social media tools into our business model. Investors are leaving their full-service brokers and replacing them with social media to ‘crowd-source’ their financial advice, and we’re committed to supporting their needs.”

I Invest Therefore I Tweet is sponsored by Questrade Inc., Online Trading Academy (Canada) and Business News Network (BNN). The panel discussion is the kick-off event for Online Trading Academy (Canada)’s grand opening.''

The cost of capitalism is repeated market mayhem, bubbles and crashes caused by financial system excesses, according to Robert Barbera, an economist with one foot in the practical world as a long time economist with investment banking firms and the other foot in the theoretical world as an academic professor.

This slim volume of 200 pages expounds the central idea with a series of fascinating, even entertaining vignettes of the bubbles and crashes of the last 30 years - the 2008 crisis and its current aftermath (the book was completed in January 2009), the 2000 tech bubble, the Japanese real estate bubble and subsequent lost decade, the 1998 Asian currency crisis. It is a book of economics for the non-economist, with no jargon and simple, but precise explanations of events, illustrated by pertinent graphs. The writing and language is engaging and flows smoothly, perhaps the by-product of Barbera being obliged to communicate constantly with non-economists in his job.

The author exhorts us to heed the ideas of Hyman Minsky, who stated that people's attitude towards risk changes with stages in an economic cycle: with prolonged good times in the recovery and growth phases, individuals get complacent and believe that the good times will continue forever, leading them to take on ever-increasing risk and leverage, goaded on by the financial system, till a typically small negative event, which he calls a "Minsky Moment", pricks the bubble and the violent slide destroys wealth, at which point everyone gets very (too) risk-averse. The financial system itself, as the holder of all the "cannot be paid back" debt, then has to be bailed out by the government. As he puts it, "Thus, government rescue operations are an inescapable part of capitalism."

There is a brilliant example on page 31 contrasting a homeowner with a conservative mortgage and one with a very large mortgage predicated on rising house prices to sustain affordability, such as was common in the USA in the years leading up to the housing crash there. The easy-to-follow table shows how a small rise in interest rates or a small decline in house prices will cause catastrophe for the large mortgage holder. This example is then extended to explain to show how the risky mortgage default effect can cascade into the general economy through financial institutions and create havoc even for those home buyers who have been cautious, or for completely unrelated companies and sectors.

Barbera thinks that destructive capitalism of most businesses benefits society by cleansing bad businesses with better ones but he says that the financial system is an exception and must be prevented from failing to prevent destructive deflation such as happened in the 1930s - thus he severely criticises the decision to allow Lehman to fail in September 2008. Barbera has an ax to grind and that ax is what he believes is the mis-perception by governments, central bankers and the mainstream of economic thinking on how the financial system works to create recurring bubbles.

Overall the book is a highly engaging and well-argued essay on what ails capitalism and the financial system. Barbera advocates that central banks should be mandated with controlling not just inflation but also asset bubbles to nip them in the bud before they grow too large and wreak havoc. He does not want to see overshoot on the regulatory side in reaction to the 2008 crisis, saying that the huge engine of wealth that is capitalism should not be hobbled too much - one might characterize it as "as much new regulation as necessary but only as much as necessary".

What is the value of this book for an individual investor?

a cautious attitude - understanding that bubbles are inherent and inevitable in our system makes one cautious and on the lookout for the next one; that is a powerful message of this book

awareness of bubble signs - it helps to know some signs to monitor since bubbles originate from the financial system, like high and climbing levels of debt and leverage; once a bubble exists it is impossible to predict when it will collapse as a slight seemingly innocuous event starts the fall

awareness of calamity indicators - if financial institutions do start failing whether due to government neglect or powerlessness, then it really is time to look for escape and safety, certainly financially and perhaps even physically

My rating: four out of five stars

Giveaway! The publisher McGraw Hill has kindly provided me with a copy to give away. So leave a comment on this post with some kind of unique name, i.e. not "anonymous", by closing date of midnight EDT Thursday May 28, 2009. If the fancy strikes you, in your comment say what you think will be the next bubble - green tech, gold, oil ... I will do a random draw to pick a winner and then I'll need to get a postal address from him/her to mail it. Good luck everyone!!

Wednesday, 20 May 2009

Did you know that inflation is usually higher for retired people? At least it is to the extent that Canada is the same as the USA. Moshe Milevsky in a January 2009 presentation along with the heavy duty paper version on Lifetime Ruin Minimization at the IFID website reveals that the mainstream average inflation calculation understated that experienced by older people (age 62+) by about 0.5% a year since 1983. The reason is that retirees spend a much greater proportion of their income on housing and health care as this breakdown chart from the presentation shows.Are things the same or different in Canada? Unfortunately, there is no such alternate inflation measure put together by Stats Canada. I phoned them just to be sure and they said they don't have one. It would be very helpful e.g. for the government to use to adjust CPP, OAS, GIS and other payments to retirees. Of course, different parts of the country have different inflation rates, not to mention large differences because of lifestyles. Another neat idea on the BBC website is a personal inflation calculator - just plug in your own spending habits and it takes the UK individual CPI components (called Retail Price Index in the UK) and adds them up with your spending proportions.

A negative consequence is that one financial product's effectiveness is undermined for retirees. Real Return Bonds are meant to counteract the effects of inflation by indexing the principal and interest using CPI. If an understated CPI is used, RRBs won't go up fast enough. The Milevsky presentation has another chart on page 10 that shows very poor correlation between the CPI-E (E = Elderly) and actual returns from US RRB funds, in other words the returns from the RRBs didn't match up with inflation from year to year at all. In fact, as a result of such poor performance, Milevsky concludes that RRBs should treated as just another asset class within a portfolio by retirees.

Canadian Capitalist had an interesting post Investing in a Period of High Inflation with good comments about RRBs. One commentor's statement that the Canadian RRBs use only Core Inflation, which strips out the more volatile, but essential to most people, components of mortgage interest, energy and food instead of the overall Total CPI is incorrect. The RRB fact sheet on the Bank of Canada website says the CPI measure used is the "All-items" CPI, which a Bank of Canada spokesperson confirmed is Stats Can's Total CPI.

Tuesday, 19 May 2009

The Insurance Bureau of Canada publishes an annual list of the Top Ten Most Stolen Cars. The latest tally for 2008 shows that models of Honda Civics retain the two top spots, a place they have held every year since 2005. Not only that it is the same two model years 1999 and 2000. They are followed by another repeat offender, the 2004 Subaru Impreza. Huh? Don't thieves update their cars too? Don't want to have your car stolen? Apparently the least stolen cars are 2003 Cadillacs,, 2002 Lincoln Continentals and 2001 Lincoln Town Cars.

Monday, 18 May 2009

Readers may have noticed my blogging absence in the last few weeks. One of the reasons for the absence is that I have been enjoying one of my kids' graduation from medical school. Though the achievement is primarily hers, there is definitely an enormous pride and pleasure for me as a parent to see the fruit of many years of time, effort and money spent raising her. The payoff of such investment is primarily emotional for the parent but for the child there is also the tangible reward of higher earnings. Doctors are extremely well paid (though saddled initially with average education debt for a new doctor apparently in the order of $150k) but higher education means higher pay on average across the board - by almost 40% in Canada over secondary education according to the Education Counts website (which also shows that women earn only about 60% what men do ... the fact that about two-thirds of the new doctors in the class were women will chip away at that statistic). Education perfectly fits with the idea of investment as something that pays off later.

Sunday, 10 May 2009

... from Being a Burden to Their Children or Country (with acknowledgement to Jonathan Swift who long ago made another famous Modest Proposal)

It is a melancholy object to those who browse the web or travel through other media, when they see the news, the discussion forums, the blogs, and editorials, crowded with beggars of the boomer generation, followed by one or two children, their retirement savings in rags and importuning every government for an alms.

These boomers, instead of being able to retire in comfort, are forced to employ all their time in lobbying to beg sustenance for themselves: who as they grow older either turn tax cheats for want of income, or leave their dear native country to work for the Global Megacorporation in Spain, or sell themselves to the McDonald's.

I think it is agreed by all parties that this prodigious number of boomers in the arms, or on the backs, or at the heels of their government, and frequently of their children, is in the present deplorable state of the kingdom a very great additional grievance; and, therefore, whoever could find out a fair, cheap, and easy method of making these boomers sound, useful members of the commonwealth, would deserve so well of the public as to have his statue set up for a preserver of the nation.

But my intention is very far from being confined to provide only for boomers of professed low income earners; it is of a much greater extent, and shall take in the whole number of boomers at a certain age who are born of parents in effect as little able to support them as those who demand our charity in the media.

As to my own part, having turned my thoughts for many years upon this important subject, and maturely weighed the several schemes of other projectors, I have always found them grossly mistaken in the computation.

As little other nourishment; at most not above the poverty line, which the boomer may certainly get, or the value in scraps, by her CPP, OAS and GIS; and it is exactly at 75 years old that I propose to provide for them in such a manner as instead of being a charge upon their parents or the government, or wanting food and raiment for the rest of their lives, they shall on the contrary contribute to the feeding, and partly to the clothing, of many thousands. There is likewise another great advantage in my scheme, that it will prevent those voluntary suicides, and that horrid practice of children exploiting their infirm parents, alas! too frequent among us! sacrificing the poor innocent seniors I doubt more to avoid the shame than the expense.

Having thus paid homage to the immortal Mr. Swift, and perhaps having suggested that times have not changed greatly in the last three hundred years, only the particulars, let us turn to the simpler, more direct and less convoluted modern diction and style, the better to be understood.

CROAK (Canada Retirement Old Age Kaput)"Ask not what your country can do for you - ask what you can do for your country" John F. Kennedy, US President, 1961(In the time-honoured Canadian tradition, we adopt the words of a United States President as the theme for our program. Like the jealous little brother, we watch the USA's every move and resent its power and influence, then proceed to imitate it and adopt its ideas. Contrary to Canadian government tradition, the program is given an easily remembered and pronounceable acronym (viz RRSP, TFSA, LIRA) related to the subject matter.)

CROAK is proposed as the government's visionary response to the new reality of the 21st century. It can be thought of as a national "best before" date for people.

Whereas,

a huge number of people in the baby boom generation is now entering retirement, which will increasingly outnumber and overwhelm the working population, with the effect that the working population will be insufficient if they are required to support the boomers

longevity is increasing slowly but steadily, such that a person retiring at 65 may easily live twenty five years in retirement, with the effect that a lot more savings is needed to sustain an income

defined benefit plans that assure lifetime income have been steadily disappearing, and people are being required to fend for themselves

defined contribution pension plans give an uncertain income at best due to market fluctuations, with the effect that not only may the required money not be there at all, the uncertainty itself creates great mental stress for the retirees

future expected rates of return on investments are forecast to be substantially lower than in the last twenty year "golden period", exacerbating the likelihood that income will be insufficient

government pension programs like the CPP, OAS and GIS are insufficient to ensure a comfortable retirement, being in total somewhere around the poverty line and it would be impossibly expensive to drastically increase the amounts, not to mention being unfair and a huge burden on the younger generation that would be required to pay the taxes

an individual cannot predict when he/she will die, creating more uncertainty and stress and a need for an excess cushion in funds to plan for a possible long life

children have an increasing burden of caring for parents, who may be alive through modern medicine but require assistance; increasing longevity can impose many more years of such care than was the case in the past, all of which reduces the productivity of young adults and takes away from breeding and raising the next generation

living disabled and/or with chronic illnesses in old age for many years is no fun for the old either

the recent financial crisis has decimated such pension plans and savings as exist, with little hope for quick recovery, leaving the distinct possibility that sufficient recovery will not happen soon enough to make up shortfalls

the combination of all these factors makes it extremely complex to plan and figure out what to do and Canada's professional self-professed "financial planners", being primarily licensed and remunerated to sell mutual funds, are on the whole woefully incapable of helping boomers cope with the situation

The Proposal: Therefore,

at age 75, every Canadian will be required by law to, so to speak, cash in their chips, to retire from life, to relocate to another world, to change state from solid to gas (why 75? it's a nice round number and easy to remember); some innocuous sounding politically correct term like "Planned Departure from Life" needs to be found - perhaps readers can offer suitable suggestions?

government will increase CPP payments to give older retired folks a more decent standard of living (using the savings described below as source of funding)

the first $200,000 of funds in a person's estate will go tax free to persons named in a will, thus creating tax neutrality and removing tax distortion effects between different types of assets and accounts (e.g. a home is free of capital gains but an RRSP/RRIF/LIRA is taken into income all at once at death and thus likely to be taxed at a high rate); this will also create an incentive to leave some for the next generation.

The Advantages:So great and numerous are the benefits of this program, and to all "stakeholders", that no one can fail to support it.

... for all concerned -

a huge simplification in planning since there will be a precise target date for all streams of money, whether income or outgo

... for the government -

reduction of about four years in pension payout now since average life expectancy is around 79

large reduction in end-of-life health care expenses as older people avoid the trip to hospital as they enter their final fatal illness (see Australian study that says older folks occupied almost half of acute care beds); by contrast, the cost of an injection such as Fatal-Plus is minimal - in fact vets could be given this added power since they are familiar with the techniques and are much cheaper than doctors for what will, after all, become a routine task, as this article from the Salisbury Post suggests (simply substitute "person" for "dog" and you can easily imagine how it would go - note below how the vets are friendly and conversational)

"Helms has difficulty holding the dog because he's so playful.

"OK, it's all right," Blinn says. "What a good man you are."

She pets the dog before administering the lethal dose, then verifies death and scratches his ear."

by age 75, pretty well everyone has slowed down so much, they have stopped working and are thus not productive members of society, i.e. a burden; if people retire at 65, they have ten years to enjoy the leisure they have earned, so it is a fair trade-off

... for the children

much reduced necessity to care for aged, infirm, sick parents in the last stages of life (at age 75 most people should be relatively healthy and capable), with several beneficial consequences - children's time off work is reduced, helping employers and the economy, less stress for children in managing their own lives, part of which is the mental distress of seeing the physical and mental deterioration of their parents and eliminating resentment children might feel towards their parents from the burden of care

a much higher probability of receiving an inheritance due to two effects - first the tax incentive for parents to leave something; second, the shorter time before departure means parents are less likely to have spent it all; third, the fixed departure date means that parents can plan exactly how much they will leave to children and the fact that parents could chose to spend it all instead of having to keep some money in reserve means that children will have to pay attention and treat their parents nicely

... for the older retired people

the opportunity to live it up and enjoy life to the max since they would know exactly their time left - no worries about money running out, it could be calculated to the penny and the limited time of ten years after 65 prevents inflation from eroding a fixed income's purchasing power too much. How much stress is there now for older people wondering if they will have enough and scrimping to make sure? Even procrastinators usually respond to a fixed deadline so a life of "no regrets" becomes much easier to attain.

going out while you are in good shape spares the embarrassment and indignity of deterioration. The authority of a government program that applies to everyone removes the stigma of early departure, such as for those today who might consider suicide.

both parents and children would have a much better chance of properly saying goodbye to each other (one could anticipate a change in the funeral industry from the sad tone of today to a feel-good "say goodbye in style"; whether the present funeral industry could make the huge cultural shift required is likely to provoke much debate by business professors but if it doesn't, one could reply that it is the creative destruction of capitalism at work, such as replacing horse-drawn buggy makers by car manufacturers)

... for the economy -

money will be recycled sooner, either by the parents spending every last penny by 75 or by the children who receive a bigger inheritance sooner

Canada could have a unique selling point amongst developed countries, all of which are aging, with a much younger and more dynamic workforce

Certainly, there are those who object that many people at 75 are still contributing members of society and it is thus highly unfair that they should also be forced out. True enough. There could be exemptions granted but creating criteria for those eligible would turn this into another bureaucratic mess typical of many (most?) past government programs. The present day calls for a new approach with simple, streamlined programs. And is modern society fair? Is it fair that the government should bail out GM and Chrysler but not Nortel or any of the hundreds of businesses hammered by the recession? Is it fair that a responsible young driver should pay exorbitant insurance rates to subsidize the bad ones of the same age? A small sacrifice for the common good of society would seem reasonable to all right-thinking people. People over 75 would still have the liberty to emigrate.

A transition period is of course advisable to allow everyone to get prepared. A very straightforward plan would be to apply the new rules for anyone turning 65 as of July 1st or some other arbitrary date and allow anyone already 65 to be "grandfathered" (that such an expression already exists in common language is a sign that this proposal makes sense).

Thus can one see how the application of logic and reason, along with a bit of imagination and drawing upon examples from the past (indeed, circumstances of life for the original inhabitants of Canada caused action similar to this proposal to occur, as the article Did the Eskimos put their elderly on ice floes to die? from The Straight Dope explains about the Inuit), enables the formulation of innovative solutions we so urgently need.